This condition gives the insurer two alternatives in the event of a loss to a pair or set of personal property items. The insurer may:
- repair or replace any part to replace the pair or set to its preloss value or
- pay the difference between the actual cash value of the property before and after the loss.
Appraisal can be invoked to determine the amount of loss. Such disputes might involve the valuation of items of damaged or destroyed personal property or involve the dispute over what constitutes like or equivalent construction.
Either the insurer or the insured may demand appraisal of a loss. If appraisal is demanded, each party chooses an appraiser - who the policy says should be competent and impartial - within twenty days after receiving a written request from the other party to submit the claim to appraisal. Affordable Insurance Company Texas
The two party-designated appraisers are to choose an umpire. If the party appraisers cannot agree on the umpire, either party may apply to a judge in a court of record in the state where the residence premises are located to choose the umpire.
The party appraisers then state the amount of the loss. If, on comparison of the party appraisers' respective loss valuation, they are in agreement, that is the amount of loss payable. If the appraisers differ as to their respective valuations of the amount of loss, they are to submit their differences to the umpire: A loss valuation agreed to by the umpire and one of the two party appraisers will determine the amount of loss.
The appraisal condition provides that each party will:
- pay its own appraiser and
- share the expenses of the appraisal and the umpire equally. (This can result in significant costs to the insured in certain circumstances.)
As a practical matter, insurers rarely demand appraisal unless they are very confident in their evaluation of the amount of the loss. One of the reasons insurers will consider demanding appraisal in a case is when they believe the insured is considering suing for bad faith (i.e., that the insured contends the insurer is low-bailing the claim). If the outcome of the appraisal is at or very near the insurer's valuation of the amount of loss, then the appraisal demonstrates that the insurer's position was reasonable.
It also then largely, if not completely, provides a defense if the insured nevertheless sues for bad faith, If the outcome is the opposite, that is, the appraisal award is significantly greater than the insurer's valuation of the loss, the insured's potential bad faith suit may have a greater likelihood of success, since the insured is then in the position of being able to argue that the insurer unreasonably undervalued the claim.
OTHER INSURANCE AND SERVICE AGREEMENTS
This policy condition addresses who should pay for a loss when it is covered by another insurance policy or by some other agreement such as a home warranty agreement or an extended warranty agreement.
When there is other insurance, the two insurers will share the loss in the proportion that their respective policy limits bear to each other, As a practical matter, if one insurer refuses to pay, the other insurer will often pay the entire claim, and then proceed to sue the first insurer to recover the unpaid share. Affordable Insurance Company Texas
If there is a service agreement such as a home warranty plan, this condition provides that the insurance afforded by the policy will only pay the excess of any amounts payable under the service agreement.
SUITS AGAINST US
Suits against us (no-action clauses) address two separate concepts. First, this condition provides that no action can be brought against the insurer unless there has been full compliance by the insured with all the policy's terms and conditions. As a practical matter, the insurer cannot prevent the insured from filing a lawsuit. All this clause does is provide the insurer with a legal defense to a lawsuit by an insured when the insured fails to follow the policy requirements, such as refusing to submit to an examination under oath or failure to comply with the proof of loss requirements.
Second, this condition provides that suit must be brought within two years after the date of loss. This provision again cannot prevent an insured from filing a lawsuit against the insurer. It does, however, afford the insurer a legal defense to a lawsuit by the insured if that lawsuit is not filed within the two-year limit. Check your policy - many policies contain only a one year period in which a suit must be brought. This provision is enforced in the same manner as is a statute of limitations.
In some states, the two-year period does not begin to run until the loss has become sufficiently apparent that a reasonable insured would know that his or her duty to give the insurer notice of the loss has been triggered. This is something that frequently becomes an issue in soils movement and foundation damage claims. Further, in some states, the clock on the two-year period stops running between the date when the insured gives notice of the claim and the date on which the insurer informs the insured of its coverage/claim decision.
Still further, if the insured is having difficulty completing the proof of loss, the insured and the insurer can enter into an agreement that the two year limitation on suit period can be extended, just as they can agree that the time for submission of the proof of loss can be extended. Any such agreement necessarily should be confirmed in writing.
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